Ending Ukraine’s Other War

By Mark Medish

March 13, 2015

WASHINGTON — Twenty-five years after the Cold War’s end, the struggle for Ukraine’s survival as an independent nation has become a test of the character of our time. Since the protests last year on the Maidan, Kiev’s main square, the country has faced two crippling wars: a hot one over its eastern provinces, and another one over efforts to prevent its political and economic disintegration.

The hot war in its rebellious, Russian-supported provinces is tentatively on hold, thanks to the latest Minsk cease-fire agreement. It has killed over 6,000 people and displaced a million more. Several major towns in the region look eerily like ruins of World War II.

The other war — less deadly but no less existential — is not about holding territory but about building a well-functioning state and economy. The months of euphoria on the Maidan have given way to awareness that Ukraine has been a quasi-failing state since the Soviet Union’s collapse. Saddled with an unreconstructed Soviet-era bureaucracy and riven by corruption, Ukraine survives today largely on the good will of several oligarchs. More robbers than barons, these bosses control key provinces, fund private armies and finance divisive factions in Parliament.

The good news is that a free and fair general election last fall brought in a new government with solid competence in several key economic cabinet posts. Moreover, the International Monetary Fund has just approved a $17.5 billion, four-year program that will provide an essential financial lifeline. The I.M.F. deserves credit for boldness; this is a rare case in which the agency has lent financial support during an ongoing conflict.

In the near term, the first tranches of the aid package should be enough to stabilize the country’s currency, the hryvnia, which has been in free fall. Yet overall it is likely to be underfunded — an estimated $40 billion in additional aid is needed, the sources of which are as yet uncertain. Moreover, the I.M.F. program requires Kiev to implement deeper structural reforms in just a few financial quarters than it has managed to achieve in two decades. No reform is more important than removing the distorting energy subsidies that have fueled corruption and dependence on Russia.

The West should be prepared to do more, applying the Colin Powell doctrine of “overwhelming force” to support Ukraine’s economy, including substantial debt relief and more bilateral aid. This will require far more robust and creative activism from Western capitals, foremost Washington and Berlin, than we have seen so far.

The donors conference scheduled in April will be important. In addition to direct budget support, technical assistance and investment promotion, future reconstruction costs for the ruined provinces must be taken into account. Donors recall Ukraine’s poor performance on several previous I.M.F. programs. They are also mindful of the hazard of throwing good money after bad, as occurred with the Russian bailout in 1998, when banks made out like bandits while the economy tanked.

How could things be different this time? The practical but imperfect answer lies in a series of reforms aimed at reducing corruption and empowering citizens. The measures should include enhanced financial surveillance and safeguards in the banking system, transparency and public accountability, cutting red tape, downsizing the bloated bureaucracy, judicial reform, an independent ombudsman and whistle-blower laws. The direct involvement of an energized civil society in this transformation process will be crucial. After all, civil society started it on the Maidan — on Independence Square.

The wild card remains Russia. President Vladimir Putin veered in a supremely reckless direction by annexing Crimea and engaging in a thinly veiled irredentist war in Donetsk and Luhansk provinces. Where will the Kremlin’s post-Cold War revisionism end? Other neighbors are understandably nervous and preparing for the worst. As the former Ukrainian president Viktor Yushchenko put it to me last week in Kiev, Mr. Putin’s goal is “not territory but space,” meaning a colonial sphere of influence.

Turning the Minsk cease-fire into a lasting peace will require rigorous diplomacy to resolve issues such as the rebel provinces’ status and cultural autonomy within Ukraine, as well as the country’s status within the European and Eurasian security context. A period of neutrality, respecting Russia’s vaunted if misplaced geopolitical anxiety about “encirclement,” seems a more plausible outcome than NATO membership.

Throughout the crisis, Mr. Putin has been careful to continue referring to Russia’s “Western partners” and to hold the door open for a degree of cooperation on Ukraine’s debt, energy supplies, trade relations and reconstruction. Philanthropy is certainly not his motive, but chaos in Ukraine is in nobody’s interest.

To be clear: For national success, Ukraine must achieve both a durable political settlement in the east and an economic turnaround based on wholesale reinvention of the state. The work of Ukrainians themselves is essential, but without stronger Western support, the odds of progress will diminish.

Since 2004, the people of Ukraine have staged two Maidan protests expressing their aspiration for a modern country free of kleptocracy and allowed to associate with Europe. Social expectations — and discontent — remain high.

If there is a third Maidan, it could look more like a Ukrainian Weimar. Cynics in the Kremlin understand this, and so must the West.

Mark Medish served as a senior White House and Treasury official in the Clinton administration.